Challenges and Tax Implications of Cryptocurrency Trading in India
Hello all #LEO Lovers and #Hive Friends
Cryptocurrencies are the future of currency, and one day, everyone has to accept it. But today, the way governments of different countries draw a line and not show any positive statement also shows that the way for crypto lovers is not easy. The Government of India also talks about cryptocurrency but never in favor. Recently, the finance minister was asked a question about the position of cryptocurrency in India. Her reply was as follows:
Indian Finance Minister Nirmala Sitharaman has stated that it is the position of the Indian government that crypto assets cannot be currencies, which are issued by central banks. She clarified that crypto assets can be used for trading, speculation, profit-making, and various other purposes. Moreover, she noted that India has raised the issue of crypto regulation with the G20, expressing confidence that “there will be some framework emerging.”
Government accepts the crypto as an asset but not as currency, which means crypto is not legal tender in India. The government is accepting and allowing the crypto asset to be used for trading, profit-making, and other purposes but not as currency. Trading is not much profitable as users have to pay heavy tax on profit, which takes a big chunk of profit.
The gains made from trading cryptocurrencies are taxed at a rate of 30%, and an additional 4% cess is also applicable. The transaction of crypto from one account to another account levies 1% Tax Deducted at Source (TDS). The funny thing is even if you transfer the crypto from your own account to another account, you still have to pay the TDS. For the government, trading in crypto is a good source of income in the form of tax, and that is the major reason they are allowing the same.
I'd like to highlight that the losses from crypto trading cannot be settled against any profit in any financial year. In general, for example, if someone makes x profit from the share market and also has y losses from the share market in the same financial year, then the final tax payable will be the x-y profit only. People can adjust their losses against the profit they make. But in the case of crypto trading, they are not allowed to adjust the losses against any profit. This does not look justified. It is okay to restrict the loss adjustment against the profit from any other asset or commodity, but here the loss from the same crypto cannot be adjusted against the profit from the same crypto.
Let's understand the same with one example. Let's say I purchase bitcoin for USD 100 when the price was low. When the price rises, I take the opportunity and sell the bitcoin for 100+ USD. The trade makes me a profit. And on the other hand, I also purchase Bitcoin Cash. But unfortunately, the price went down, and cautiously I sold BCH and booked the loss.
In the above scenario, I make a profit from bitcoin and also have losses from BCH. As per law, I have to pay the tax as I have a profitable trade, but there is no adjustment of losses from BCH against the profit from Bitcoin. The government is in a win situation as they will get the tax for every profit you make.
It's very much clear form action of Goverment's that they are not in favor of implementing the cryptocurrency. But I am sure that the Government will underhand, when the other countries will impliment and accept the cryptocurrency bills. This will create the pressure on Indian government also.
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Paying a chunk of 30% to the government is too ridiculous in my view.
Maybe that's because we never had to pay any taxes here in Nigeria(yet). After all, the government doesn't even see crypto as an asset to begin with, so all activities have to be discreet in a P2P model.
The government are only here to take from you without thinking if you are losing more than you win. I think we need more models to escape from the taxmongers.
P2P model here in India also but I have not tried yet. P2P is off the record so you are not paying tax.
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